Overview of Colorado Taxes
Colorado is home to Rocky Mountain National Park, upscale ski resorts and a flat income tax rate of 4.63%. Aside from state and federal taxes, Centennial State residents who live in Aurora, Denver or Greenwood Village must also pay local taxes.
This calculator reflects the 2018 federal withholding tax changes.
Click here to learn more about how the Trump Tax Plan will affect you.
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- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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Colorado Paycheck Quick Facts
How Your Colorado Paycheck Works
No matter if they ski, hike or enjoy sports games at Mile High Stadium, Colorado residents are going to have taxes taken out of their pay.
Your employer will withhold taxes from every paycheck you get, including federal and FICA taxes. This money goes to the IRS, who then shoots it off to places like Social Security and Medicare, as well as toward your annual taxes. The amount withheld for federal taxes depends on you and the information you’ve filled out on your W-4 form. Remember you need to fill out a new W-4 if you want to make changes (for example after having a child) or when you start a new job.
In December 2017, President Trump signed a new tax plan into law. The IRS has since released updated tax withholding guidelines and taxpayers should have seen changes to their paychecks, to reflect the new tax plan, starting in February 2018. For the time being, taxpayers do not need to fill out a new W-4. Employers will use the withholdings on your current form.
Bet you’re curious what affects your taxes. For one, your marital status impacts how much gets taken out, as well as whether or not you decide to file separately from your spouse or are the head of the household. Any Coloradans who are considered common-law couples also have the option to file jointly. Don’t forget that having dependents might affect your pay as well. Other factors include frequency of pay and if you have more than one job.
Let’s not forget about withholding allowances. If you qualify, you might end up with a larger paycheck. However, if you claim too many allowances, you might be slapped with a bigger tax bill when you file during tax season.
Colorado Median Household Income
|Year||Median Household Income|
Coloradans are taxed at a flat state income tax rate of 4.63% of your federal taxable income, regardless of your income bracket or marital status.
If you work in Aurora, Denver or Greenwood Village, you will also be taxed locally. These taxes are also flat rates. If you work in Aurora, $2 will be taken out of your pay every month if you earn over $250. In Denver, you’ll be taxed at $5.75 monthly if you make more than $500. And employers in Greenwood Village will take out $4 every month if you earn more than $250.
Colorado residents who work in another state should be aware of is the Tax Paid to Another State credit. If you live in the Centennial State and your income is taxable in another state, you may qualify for a credit for taxes paid to the other state.
If you’re in the military on active duty, you might not have state taxes withheld. You will need to make sure that you establish Colorado as your state of legal residence. You can do that by registering to vote there or purchasing property there. Once you do that, any money you get from being in active service doesn’t count as taxable income when figuring out Colorado income taxes (meaning you won’t be taxed in Colorado for that amount).
For those looking to move to Colorado, brushing up on the state’s income taxes is important, but you’ll also want to learn about what it’s like getting a mortgage in Colorado. Our mortgage guide has the important information to make sure you’re up to speed on what the mortgage market is like in the Centennial State.
Colorado Local Tax Rates
|Aurora||$2 per month on income over $250|
|Denver||$5.75/month on income over $500|
|Greenwood Village||$4/month per month on income over $250|
How You Can Affect Your Colorado Paycheck
There are many different ways to tweak your paycheck to adjust how much you pay in taxes. If you paid a lot of income taxes last April, it might be a good idea to adjust your withholding. Take a look at your W-4 to see what you can change. You may have been paying your taxes on time, but getting slapped with a huge tax bill isn’t fun, especially when you may be subject to underpayment penalties.
If you think you’ll pay a lot of taxes again this year, using a paycheck calculator to create different withholding scenarios will help you see specific numbers and decide what is best for you. You may need to claim fewer exemptions or alter your filing status (if you can) to help you. This might mean you’ll see a smaller paycheck, but think of it as paying more of your taxes over time so you don’t have to pay a huge lump sum every year.
Changing your allowances is one way to change your withholding. Take a look at your situation, such as new dependents or claiming a common-law partner (if you have one) on your W-4. All of these are opportunities to claim more or less, so tweak to your choosing.
An easy way to have more taxes withheld is to ask your employer to do so. When filling out a new W-4, simply write in the dollar amount you want withheld. For example, you want $60 taken out of each paycheck, then all you need to do is write that amount on the correct line on the W4.
Finally, one more way you can tweak your paycheck is to modify your pre-tax contributions which will lessen your taxable income. If your employer offers benefits, think about putting more into things like a Health Savings Account, a commuter program or other types of flexible spending accounts. You might also want to increase how much you’ve been putting into your retirement account, like your 401(k) or 403(b). This money comes out of your paycheck before taxes are taken out, so they actually help to lower how much you owe Uncle Sam.
Colorado Top Income Tax Rate
|Year||Top Income Tax Rate|
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2016 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics